Did you know that the first U.S. income tax law was passed in 1861 to fund the Civil War?
Back then, the tax rate for high earners was a comparatively manageable 3%, and the entire tax-payer instruction pamphlet was only four pages long.
Today, the entire Internal Revenue Code approaches 75,000 pages.
Yes … it’s become a little more complex.
Whether you prefer meeting with us in Gold River, our Roseville office, or virtually, short- and long-term tax planning are opportunities to preserve your wealth. In fact, it may surprise you that, in terms of pure percentage, pre-emptive tax planning could save you as much money year-over-year as a great investment strategy might provide in returns.
It’s that important.
Because by helping you prepare, stay organized, and identify opportunities for long-term financial success, we work to not only simplify the planning process, but we can also help you reduce worry while integrating your individualized approach in a way that drastically improves your financial life.
We are your partner on the freeway to prosperity.
With the 2024 tax filing season knocking on the door, here’s what you should do.
First, Key Tax Dates for 2025:
The words “deadline” and “IRS” are about as subtle as a frozen snowball to the face.
Simply, the IRS doesn’t have a sense of humor and procrastination is costly.
Staying on top of key “due dates” to avoid penalties and missed opportunities is critical so you don’t waste money.
Mark these 2025 dates on your phone, computer, or calendar:
- January 15th: We’ve just passed the first deadline for Q4 2024 estimated payments, but this date still bears acknowledgement. Individuals, including sole proprietors, partners, and S corporation shareholders, generally must make estimated payments if they expect to owe taxes of $1,000 or more when their return is filed.
Underpayment penalties are currently 7%, so plan accordingly.
- January 31st: Each year, employers and financial institutions must issue W-2s, 1099s, and other tax forms by the end of January.
- February 15th: 1099-B, 1099-R,1099-DIV, and 1099-MISC forms for individual, joint, retirement, and trust accounts are typically released in mid-February.
- April 15th: The most well-known of all tax filing deadlines, April 15th is also the last day to retroactively contribute to a 2024 IRA or HSA.
- October 15th: Final deadline to file tax returns if you applied for an extension.
Next, how should you organize yourself so that your tax filing process goes smoothly?
As touched upon above, with proper planning and a strategic partnership, taxes needn’t be overwhelming. True, the complexity of our tax code is intimidating, but it also means that there is a lot of opportunity for those who become educated and embrace the process.
Partnering with ProsperPlan Wealth helps because we are fiduciary advisors (every decision or recommendation is 100% in your best interests) and we are experts at navigating the complex worlds where tax planning and financial planning intersect.
And to be clear, this is not some dodgy shell game approach with creative deductions. Not even close.
I’m referencing utilizing the rules, laws, and regulations that pertain to taxes, investments, and distributions, then preparing in advance, and then using our planning expertise to remove uncertainty and save you money.
And that begins by getting organized.
As the tax industry evolves, the next generation of tax professionals is turning to advanced technology to drive efficiency. With many experienced tax experts retiring—and a severe lack of new accountants entering the field—innovative tools like tax portals, digital data collection forms, optical character recognition (OCR) for easy data entry, and AI are stepping in to help tax teams across the country meet the growing demand for professional tax filing.
If you’re approaching tax season without a dedicated team to support you, now is the time to act. Contact us as soon as possible to schedule an appointment to onboard with our trusted team of tax professionals.
To help you navigate tax season with ease, we’ve created a step-by-step guide for organizing your essential documents. This includes Social Security and healthcare forms, as well as other key records, so you’ll be fully prepared—whether you’re working with an enrolled agent, a member of our tax team, an accountant, or using DIY tools like TurboTax.
Step 1: Basic Set Up – Create a Digital Filing System
This is straightforward.
Create a new folder (right click) on your computer labeled “2024 Taxes.” Within this folder, create subfolders (right click, again) for categories such as “Income,” “Deductions,” “Investments,” “Social Security,” and “Healthcare.” This organization will save time and make it easy to find specific files when you or your tax preparer needs them. (Email these docs ahead when you are meeting with your advisor or your accountant.)
And if you prefer physical copies? Use a clearly labeled accordion folder with tabs for each category.
You can get those documents scanned into digital formats by working with a member of our team, but we also recommend well-known PDF scanning apps like Adobe which easily capture scans using your phone’s camera or purchasing a small digital scanner for your home office.
Step 2: Know What Documents You’ll Need
Next, here’s a checklist of many of the tax documents you’ll need to gather. Key categories include:
- Income Documents: W-2s from employers, 1099 forms (1099-INT for interest income, 1099-DIV for dividends, 1099-R for retirement distributions, and 1099-B from custodians for investment transactions), and K-1s for partnerships or trusts.
- Social Security Forms: If you are already receiving Social Security, you’ll need Form SSA-1099 (which the Social Security Administration should issue to you in January).
- Healthcare Forms: If you have health insurance (as opposed to “self-insuring”), keep an eye out for Form 1095-A (if your insurance is purchased through the marketplace), 1095-B, or 1095-C, which report your compliance to Affordable Care Act requirements.
- Deduction Records: Charitable donation receipts, property tax statements, mortgage interest forms (Form 1098), and medical expense documentation.
- Retirement Contributions: Statements confirming IRA or HSA contributions made during the year.
- Business Ownership Information: Gather all income statements, expense ledgers, and payroll records for 2024. Don’t forget key documents like 1099s issued to contractors, depreciation schedules, and updated records of any major asset purchases or sales.
- Last Year’s 1040: If you have found yourself in the position of replacing a retiring tax advisor, make sure your new tax team has a copy of last year’s tax filing.
Step 3: Download and Save Documents as PDFs
Most tax forms are now accessible online. Log in to your employer’s payroll portal, your custodian’s website, or your Social Security account to download forms like W-2s, SSA-1099s, and 1099s. Save each form as a PDF in your “2024 Taxes” folder. (You can do this by pressing “control “P,” and then saving it to the appropriate file). Use clear and consistent labeling, such as “W2_EmployerName_2024” or “SSA1099_2024,” for easy identification.
Step 4: Track Charitable Donations and Deductible Expenses
Strive to be consistent when it comes to keeping records of deductible expenses such as charitable donations, medical bills, and education costs. For charitable contributions of $250 or more, you’ll need the:
- Name of the organization
- Amount of the contribution
- Description and estimated value (for contributions other than cash)
- Statement that no goods or services were received in return for the donation
- Statement that if goods or services were received in return for the donation, they were intangible and “religious” in nature
Step 5: Double-Check Your Social Security and Healthcare Documents
When it comes to accurate filing, Social Security and healthcare forms are among the easiest to overlook. Review your SSA-1099 to ensure it reflects the correct benefits received and an accurate account of the taxes withheld. For healthcare forms, confirm your coverage is reported on Form 1095-A, 1095-B, or 1095-C, especially if you purchased insurance through the marketplace and are reconciling advance premium tax credits.
Step 6: Share Your Folder with Your Tax Preparer
Once your documents are compiled and organized, as mentioned above, you’ll want to share your “2024 Taxes” folder with your advisor, your CPA, and/or tax preparer. If you don’t have a tax preparer, let us know. As mentioned above, we partner with an excellent tax team to provide simplified filing (and enhanced tax planning) for our clients.
Bonus Tip: Think Ahead to 2025
Now that you have a guide to help you organize your 2024 tax documents, think ahead to next year. Setting up a system now to track income, expenses, and contributions in real time will make next year’s tax season even smoother.
For techies, we encourage you to use expense tracking apps to get organized. We love QuickenSimplifi and Monarch Money!
At ProsperPlan Wealth, we strive to make tax season manageable and as stress-free as possible. Whether you need help gathering documents, navigating Social Security or healthcare forms, or connecting with a trusted tax professional, we’re ready to assist.
Let’s work together to turn tax season into an opportunity for financial clarity and confidence and future success.
Important Tax and Financial Birthdays
Remember, specific ages unlock financial obligations and opportunities. Here are the key birthdays you should always keep top-of-mind.
- Age 50: Eligible for catch-up contributions to IRAs and 401(k)s.
- Age 55: Penalty-free withdrawals from 401(k)s may be allowed if retired.
- Age 59½: Penalty-free distributions become available for IRAs and other qualified plans.
- Age 62: Early Social Security retirement benefits may be claimed, but at a reduced amount.
- Age 65: Medicare enrollment begins three months before your birthday—don’t delay!
- Age 67: Full Social Security retirement benefits are available for those born in 1960 or later.
- *Age 73: Required Minimum Distributions (RMDs) must begin from retirement accounts.
The reason I put an asterisk in front of “Age 73” is because of something I’ve written about earlier in this guide. I’ve spoken about preemptive tax planning and how it can save you money. While this is a guide to help you prepare to file your taxes, here’s an example: Let’s say you are over age 59½ and you have a large balance in your 401(k).
It’s common to think you’ll just leave that money alone to grow until age 73 when, by law, you must start taking distributions (withdrawals).
However, depending on your financial situation, this may be a big mistake.
That’s because the amount of RMDs is based on an IRS formula that ensures you draw that money down as quickly as possible so it can be taxed. Depending on your other sources of income and the size of the RMDs, you might get bumped up into a higher tax bracket.
And that could mean paying thousands of dollars extra in taxes.
Everyone’s situation is unique. But for some clients, we advise them to take distributions from their retirement accounts or perform Roth Conversions well before age 73 to lower their future tax burden.
Speak to us before embarking on this path, but as a reminder, this is a part of what forward-thinking tax planning considers.
The ProsperPlan Approach to Tax Planning:
At ProsperPlan Wealth, taxes are more than an annual obligation – they’re a key part of your overall financial strategy. We focus on reducing your tax burden over a lifetime, not just a single year. From maximizing retirement contributions to optimizing charitable giving and leveraging tax-efficient investments, our team works to align your tax strategy with your long-term goals.
If you have questions about key deadlines, or you want to work with our highly experienced tax team, please reach out today for a complimentary planning consultation.
Together, we’ll turn tax season into an opportunity to build clarity and confidence in your financial future.
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Your Team at ProsperPlan Wealth,
